Legal Issues in Smart Manufacturing

Legal Issues in Smart Manufacturing

Two lawyers walk into a smart manufacturing conference. Sounds like the beginning of a bad joke, right? Well, no, actually, it was the reality last month when lawyers Matt Pollins, partner and head of commercial/TMT at legal firm CMS Singapore, and Wong Hong Boon, manufacturing and supply chain legal counsel at 3M Singapore, joined a panel chaired by ARC Advisory Group at the inaugural Smart Manufacturing, 3D Printing & Industry 4.0 Forum event, in Singapore, to discuss legal challenges emerging from the rising adoption of technologies like artificial intelligence, cloud and internet of things in the manufacturing sector.

On stage along with the lawyers and contributing to what was a vibrant and engaging panel session: Ani Bhalekar, Head of IoT/Industry X.0 & Mobile Practices for ASEAN+, Accenture; CK Vishwakarma. CEO/Founder of IoT interest group IoTSG; and Dean Shaw, Industry Solutions Director, Microsoft.

With the aim of illuminating a tangential aspect of Industry 4.0 little understood by manufacturing end users or by many technology suppliers, I posed a number of questions to the panel and what follows is a summary of the discussions in the first half of the one-hour session. Part 2 of this article, next week, details issues of data privacy, data ownership, and the legal implications of artificial intelligence, which the panel also debated and discussed.

Q: Why do we need to talk about legal issues at a smart manufacturing conference?

Because the technologies and projects discussed during the two days of this forum do give rise to legal issues – whether its cybersecurity, privacy, who owns the data, intellectual property, etc. And also, many deals are not happening and projects are being blocked because of concerns about the legal implications. However, quite often, the perception of the extent of the legal challenges is worse than the reality. Yes, there are issues, but with common sense and good business practice you can navigate your way through.

Another reason is that clients often come to legal counsel too late in the process, when there is already a done deal. When the legal issues come up at this stage, counsel can get a bad reputation as a type of business prevention unit. So we need to emphasize that legal is not scary; there are legal obligations that companies need to meet but if you work with your lawyers from Day 1, you can mitigate the pain points right from the beginning and avoid any impact on project implementation. There is still a job to be done to raise awareness of legal issues related to smart manufacturing and so this conference topic is very timely.

Q: How can and how should lawyers get involved in smart manufacturing initiatives?

Lawyers are primarily concerned with liability of your organization and can advise on key issues such as: What are you liable for to your customers? What liability needs to be borne by your vendors? What are your liable for to the regulators? What are the different jurisdictions (and their implications) of all the countries in which you are operating?

It is very much about legal working with the business to come up with the right processes, policies and having the right people in place to implement the whole smart manufacturing process. The law should not be seen as a hindrance but rather a framework to help define risks and responsibilities and should certainly not stop you from innovating in this sector.

When we talk about the law, traditionally, it’s about managing the risk of a transaction. But the definition of risk is changing: risk used to be adopting new IoT technology or moving data to the cloud etc, but now risk is standing still and letting others overtake you. Legal counsel’s partnership with the business is perhaps not fully evolved yet but it is getting better and faster. Indeed, there has been progress over the last 10 years, with the often acrimonious relationships with in-house counsel at manufacturing and technology companies being replaced by lawyers thinking a lot more about their role in facilitating desired business outcomes.

Q: Cloud adoption is increasingly rapidly. Are there legal issues that companies should be concerned with around this trend? 

There are often questions related to the geographical location of data. For example, I have a manufacturing plant in the Philippines and store data from that facility in Singapore  – so which country’s jurisdiction do I need to be concerned about? Well, the plant itself would be subject to Philippines data protection laws that specify how and whether you can transfer data outside of the country. When the data lands in Singapore additional considerations arise like law enforcement access to the data i.e. can the police can come to the data center and ask to see the data? So the answer is that once data is in the cloud, several different jurisdictions can apply but first and foremost, you would be concerned with where the data originates, which in this case is the Philippines.

With cloud, when it comes to the issue of data sovereignty, there can be a gap in CTO understanding  in terms of what they can and can’t do with the data, and this is an example where commercially oriented legal counsel at cloud technology providers can help get customers comfortable with migrating data to the cloud and what data in certain cases mat need to be kept on premise.

Microsoft is a good example because the company almost uses legal as a sales tool. Because a lot of people thought that you could not adopt cloud if you are manufacturing in, say, Indonesia, it has developed a websitethat summarizes the regulations that apply to cloud across the region. It enables companies to cut through the regulatory landscape and helps them realize they can do more things with the cloud than they had envisaged.

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This is an article published by Bob Gill on ARC Advisory Group website.